Water Rate Study for City of Lemoore

Transcription

1 Water Rate Study for City of Lemoore June 17, 2016 Prepared by: Dan Bergmann, Principal 15 Shasta Lane, Walnut Creek, CA Office:

2 Water Rate Study for City of Lemoore June 17, 2016 Purpose The purpose of this cost of service water study is to review and modify the existing water rate structure to set rates such that each customer class provides revenue to the water enterprise consistent with the cost to serve them. Additionally, overall operating costs, debt, assets, and revenue are analyzed to evaluate reasonableness of costs, and the need to increase overall revenue to fund significant improvements necessary for Lemoore s water system. These steps are conducted to be consistent with the requirements of California s Proposition 218. Summary Lemoore s existing rate structure is not based on cost of service. The City s current fixed monthly fee rate structure is based on the account and not on meter size, as opposed to grouping customers by similar profiles. Additionally, revenue has fallen over the past few years because of the drought (customers are using less water, but the infrastructure demand and operating costs remains constant); therefore, overall rates need to be increased to make up the shortfall, and also for needed infrastructure improvements. System improvements are needed both for water quality and system reliability. The estimated cost of the improvements is substantial at $39 million, projected to be spent over five years. Most of it will be paid with an anticipated bond issuance; however, some of the estimated costs will be paid from ongoing revenue. Approximately half of the funding will go towards water quality improvement, and the other half to system reliability. Water will be treated primarily for excessive trihalomethanes, a disinfection byproduct of added chlorine. Water will also be treated for trace amounts of arsenic, for better clarity, and for a better ph balance. System reliability improvements will include replaced pipelines, new wells, and new storage tanks. To cover anticipated costs, revenue needs to be increased 35% January 1, 2017, then 30% per year for the following three years. New rates have been developed using cost of service methodology consistent with the American Water Works Association. Customers have been grouped together based on similar usage profiles, and system-operating costs have been assigned to customer classes as a function of cost to serve each class. Further, because of the extent of the revenue increases, the cost of service rate model was developed for each of the four years using the increased revenue needed in each successive year. New rates are weighted between fixed monthly and volumetric based on meter size and customer class. Volumes sold during 2015 are used as planning volumes over the entire four-year period, assuming volumes will not drop due to further conservation. City Council and customer communication began in March 2016 regarding the rate increases and has been on going through the rate study process. See Attachment A for the existing rates and Attachment B for the proposed rates. 2

3 Existing Rates Lemoore s existing rates are amongst the lowest in the Central Valley as shown in the bar chart on page ten. This is because water rates in Lemoore have not been increased since 2007, and no significant improvements have been made to the water system. 1 Because of the drought and reduced water sales, the revenue associated with the exiting rates in not sufficient to cover existing operating expenses. Additionally, significant system improvements require an increase in revenue beyond the amount needed to cover current costs. Lemoore s existing rate structure does not collect revenue such that each customer class provides revenue consistent with the cost to serve them. The primary reason is that customer classes have not yet been defined and therefore existing rates are not determined based on cost of service. For example, most customers pay the same fixed monthly fee of $13.20, and most customers pay similar volumetric fees, ranging in a narrow, tiered, band from $0.90 to $0.95 to $1.00 per hundred cubic feet (HCF). A review of water system billing data reveals that almost all residential water has been sold billed at the $0.90 level. The existing rates also include between 300 and 700 cubic feet of water in the fixed monthly charge, depending on customer type. Lemoore has approximately 60 customers still unmetered on flat monthly charges. These are mostly small businesses in the historic downtown area. Of the seven flat rate categories, only two are in use, Multi-Family and Other Commercial. Water Conservation, Volume Projections and Unaccounted-For Water Water production and sales decreased 20% during the last three years through 2015, reducing revenue by approximately $600,000. For the purpose of revenue planning, 2015 volumes are assumed to be a baseload number that will not decrease further, as extensive conservation has already been achieved, combined with the significant demand of food processors that is flat, and the increase in rain this past winter. To the extent water sales are able to increase above the 2015 planning levels in the next few years, the Lemoore City Council will have the option to adjust accordingly by easing subsequent rate increases. Lost and Unaccounted-for (LUAF) water was determined by measuring the differences each month of 2015 between water produced and water billed to customers. This was achieved by processing approximately 80,000 customer-billing cycles through a large Microsoft Excel workbook. The initial result was that LUAF is less than 10%, which is excellent. 2 The recommendation was made to test and calibrate meters on the water production wells. If the impellers on the production well meters are worn, they will cause low reading that will serve to reduce the LUAF value for the water system. City personnel should also continue to monitor customer meter billing multipliers to assure accuracy in billing statements. 1 Resolution , dated December 18, The American Water Works Association shows the typical range for LUAF to be 10 to 20% of water produced. 3

4 Water System Improvements Lemoore is currently under an Alternate Compliance Order from the California State Water Resources Control Board to comply with total trihalomethanes (TTHM) maximum contaminant level requirements by October 31, As the City prepares to meet the TTHM requirements, it will also install measures to improve Lemoore s water in other ways, including removal of slight levels of arsenic, removal of organic matter, improvement in clarity, and adjustment of ph. When the project is completed, all Lemoore water will be treated to a higher standard, whereas now, only chlorine is added to the water. It should be stated that Lemoore s water is currently safe for drinking. The estimated cost of needed improvements to the water system over the next five years is $39 million, as estimated by Lemoore s City engineer. (See Attachment C for detail). Approximately half of this amount is for water treatment equipment to improve the quality of Lemoore s water. The other half is to improve the reliability such as, new/repaired wells, added storage tanks, and replacement of old pipelines. The large magnitude of these improvements is unprecedented in the history of the system. For revenue requirement planning purposes, $30 million will be debt funding and the remaining $9 million will be provided on a pay-as-go basis. 3 Compliance Order R-004, issued October 27, The TTHM limit is also known as the Stage 2 Disinfection Byproduct Rule, which was adopted June 21, 2012, by the State Water Board. 4

5 and Expense Evaluation Rate-based revenues have been falling since Fiscal Year (FY) 2014/2015 because of the drought and water conservation. Expenses have stayed relatively flat. As a result of reduced water sales, at the end of FY 2015/2016, the water enterprise will experience an operating loss of approximately $300,000. Consequently, for FY 2015/2016, revenue needs to be increased by nine percent, even before additional costs for system improvements. 4 The need for system improvements cause the resultant increases to be substantially higher than nine percent. (See Attachment E for detail.) The balance sheet for the water enterprise is healthy. Available cash at the end of FY 2014/2015 was $3.9 million, approximately one times annual revenue. The only long-term debt is $6.2 million for the loan to install photovoltaic panels. The cost of the loan payments should be offset by lower electricity costs. Beginning in FY 2016/2017, personnel costs are increased to account for additional headcount needed. Going forward, other expenses are increased by two percent as a proxy for inflation, except the increase for electricity is higher based on actual trends. General government overhead and customer services are held constant pending the outcome of a cost allocation study. These are not expected to increase. The most substantial increase is for operations and maintenance costs associated with new water treatment facilities to be constructed, exceeding $2.5 million per year when the project is finished. Debt financing will likely be used for the construction and improvement of any water infrastructure projects that have a useful life of more than 10 years, to ensure inter-generational equity, so that the cost of infrastructure will be paid for across the user base that will benefit from the improvements. The bond payments would come from the revenue generated by the ratepayers of the water system. Payments for bond funding are planned to begin in FY 2018/2019, and are then increased over two years by deferring principal payments and by capitalizing some interest in the first year. This allows rates to increase gradually over several years, rather than abruptly. The interest rate used in the calculation ranges up to five percent with most of the periods at five percent. For planning purposes, this is conservative to assure revenue is adequate to cover the bond payments in the event interest rates increase before the bonds are sold. The prospective amortization table may be seen in Attachment D. Needed revenue is increased over a four-year period to allow customer-billing amounts to increase gradually, and to approximate the timing for investments to the water system. The increased contribution of rate-based revenue is very substantial, increasing by a factor of nearly three by FY2020/2021, compared to FY2015/ $300,000/$3,370,000 x 100% = 8.9% 5

6 Rate Design The newly proposed rates are developed using the American Water Works Association Cost of Service rate setting methodology. This methodology first groups customers into classes with similar usage profiles to compare to the water infrastructure used to serve them. Customers were divided into groups as follows. Customer Count Single-Family 6,325 Multi-Family 219 Schools / City 58 Commercial 114 Industrial - Regular 5 Industrial - Seasonal 4 Totals 6,725 Rates and fees are then set to charge each group consistent with the cost incurred on the system to serve them. For Lemoore, because of the substantial increases over four years, the model was run four times, once for each year. Each time the revenue requirement was increased consistent with the revenue/expense projections. However, volume, capacity, and other weighting factors were held constant. The various components of the cost of service analysis are contained in Attachments F-1 through F-5, and are summarized here in the order. Attachment Contents F-1 Cost of Service Table Summaries ( ) F-2 Functionalization and Classification Detail ( ) F-3 Volumetric and Capacity Allocation Factors F-4 Weighting: Distribution, Administrative, Fire, and Billing F-5 Fixed and Volumetric Rate Setting ( ) The City of Lemoore water system is generally one geographic area with water production and distribution interspersed, except for the North well production field five miles north of town. Some portion of water from the North field is able to flow to all of Lemoore s customers when needed. Therefore, the cost to distribute water from production to customer is calculated as the same for all customers, as a function of volume. Lemoore is supplied by nine producing water wells, four of which are in the North field. The water system also has the support of several water storage tanks benefiting all customers. Well #9 is an exception in that it is not connected into the water distribution system, but rather connected directly to Olam Foods. It is used only during the tomatoprocessing season. For rate setting purposes, the volume of water delivered to Olam from well #9 is included; however, the volumes from well #9 are removed from the peak capacity calculation because the well is operated outside the integrated water system, and including the peak contribution would escalate Olam s water cost unreasonably. Moving forward, it is the City s intent that industrial users will be required to receive water from the City s treated system, and that the City s water wells will be fully integrated with each other. 6

7 The cost of service results, illustrated below, shows a new average cost to be $1.58 per Hundred Cubic Feet (HFC) compared to the existing average cost of $1.17. The difference is the initial 35% increase to move revenue upward to cover existing operating costs and begin to cover the cost of infrastructure improvements. Existing Averages vs. Proposed Cost of Service Averages $/HCF for January 1, Proposed Average: $1.58 Present Average: $1.17 Fire Protection Billing & Customer Services Administrative Overhead Capacity Distribution Volumetric Present Rate Class Present System Average Proposed System Average A review of the existing averages compared to the proposed averages shows the biggest disproportionate changes are to the Government/Schools and the Industrial-Seasonal classes. The reason is that these two classes have the highest summer peaking usage compared to other classes. Cost of service methodology requires that each customer class compensate the system for standby capacity needed for each class in the months it is not used. Customer classes with lower capacity factors, such as Industrial-Regular, benefit because these customers have a very flat load profile across the months and therefore use the system very efficiently. The multi-family class is experiencing the lowest increase because the existing rate structure charges each living unit $6.55 per month, whereas the cost of service rates are based on meter size and water flow, yielding a lower average amount. The proposed billing structure consists of a fixed monthly fee and a volumetric fee for each customer class. The objective of the rate design is to create a fixed-volumetric combination for each customer class that approximates the cost of service to each class. All single-family homes are proposed to pay the same service fee, even though some have 1.5-inch meters required for fire 7

8 protection system. The rate design should not penalize residential customers required to have fire protection systems. The proposed monthly service fee is $13.00, essentially the same as the existing $ The basis for $13.00 is to achieve a balance between the fixed and volumetric component for single-family such that an average bill is approximately 50% fixed and 50% volumetric. One difference is that the new monthly fee does not include 700 cubic feet of water. These 700 cubic feet will now be billed volumetrically. Beyond single-family, since instantaneous demand on the system is a function of meter size, it is appropriate to increase the fixed monthly service fee as a function of meter size. This is because larger demand on the system indicates the system capacity has to be adequate to handle that demand on a peak demand day. The proposed fixed monthly fees have been skewed slightly from the standard industry scale that is based on meter size. The monthly fees are held lower for the smaller meter sizes up to 1.5 inches, then ramped up based on meter size to the largest meter size of twelve inches. Monthly meter fees were kept lower for smaller customers to maintain a balance between the fixed and volumetric components. If not, the volumetric rate for the commercial and multi-family customer classes would have been disproportionally low to achieve the overall revenue contribution needed for these two classes. The following is the calculation of fixed monthly fees for The tables for 2018 through 2020 are provided in the Attachments F-5(b) through (d) at the back of this report. Meter Size Calculation of Fixed Monthly Service Fee and Year 2017 Number of Accounts Meter Size Multiplier* The volumetric rates were set in conjunction with the fixed monthly fees to achieve the appropriate cost of service result for each customer class. The following table shows the calculation of the volumetric rates for each customer class for The tables for 2018 through 2020 are provided in the Attachments F-5(b) through (d) at the back of this report. Rate ($/Mo) ($/Yr) All Single Family 6, $13.00 $82,225 $986,700 Up to 1 1/2" $ ,175 62,100 2" and 2.5" $ , ,100 3" $ ,900 4" $ ,440 77,300 6" $ ,300 27,600 8" $ ,888 70,700 10" $1, ,174 38,100 12" $1, ,978 23,700 Totals 6,725 $117,184 $1,406,200 * Factors based on American Water Works Association 1" Base Scale 8

9 Customer Class Calculated Volumetric Rate to Meet Overall Requirement Year 2017 Requirement Less Fixed Balance at Volumetric Volume HCF Calculated Rate / HCF Fixed Percent of Total Single-Family $1,882,002 $986,700 $895,302 1,030,000 $ % Multi-Family 463, , , ,000 $ % Schools / Govt 302,449 94, , ,000 $ % Commmercial 315,984 59, , ,000 $ % Industrial - Regular 1,229,091 39,000 1,190, ,000 $1.20 3% Industrial - Seasonal 357,398 35, , ,000 $ % Totals / Averages $4,550,000 $1,406,300 $3,143,700 2,887,000 $4,550,000 $1.58 per HCF overall average Customer Communication and Implementation of New Rate Structure Anticipating the impact on water customers of the need for substantially increased revenue, extensive communication has occurred as follows. City Council Workshop #1 March 15, 2016 City Council Workshop #2 April 19, 2016 Informal Citizen Meeting June 6, 2016 City Council Meeting to issue notice June 8, 2016 Mail date of notice to all customers June 28, 2016 City Council Rate Hearing to approve rates August 16, 2016 (planned) Additionally, ratepayers received invitation postcards prior to the second workshop and prior to the citizen meeting. Presentations given at City Council have also been available on the City s website. The highest number of customers affected by the rate increase is the single-family group with approximately 6,300 accounts. Accordingly, the following detailed analysis is provided for this class showing the impact on a typical single-family home of the increases. For comparison sake to other cities, the value of 15,000 gallons (2,005 cubic feet) per month is used for a typical summer month. 5 The average monthly cost to single-family homes will increase 22% in the first year, less than the system average of 35% percent. This lower amount is because of the cost of service adjustment to single-family rates. However, in subsequent years, the single-family amount will increase nearly as much as other customer classes. The table below shows the average single-family increases. 5 The actual value for an average metered residential customer in Lemoore is slightly higher, at 16,200 gallons per month, based on the average of non-zero usage accounts in July

10 Single Family: Proposed Water Cost Increases Cost Detail for 15,000 gallons (2,005 cubic feet) Fixed Monthly Usage Total Increase Existing $13 $12 $ $13 $17 $30 22% 2018 $17 $22 $39 28% 2019 $22 $28 $50 28% 2020 $29 $35 $64 29% The bar chart below illustrates Lemoore s current water cost compared to neighboring and other communities. It should be noted that Lemoore s rate is on the lower end of the rate comparison. After the first increase, Lemoore will move only marginally on the comparison scale. The comparison for subsequent rate increases is not shown because over the next few years other cities rates will be increasing also. However, even if other rates did not increase over time, at $64 per month in 2020, Lemoore would be approximately even with the present levels of Bakersfield and Corcoran. Single Family Water Cost Comparison Summer Typical: 15,000 gallons (2,005 cubic feet) $ $ $80.00 $60.00 $40.00 $20.00 $

11 Conclusion Water quality improvement and repair to Lemoore s water system is overdue. Additional revenue is needed to cover existing operating costs because of reduced sales caused by the drought and water conservation. Substantial additional revenue is needed to improve water quality and upgrade the reliability of the system. The proposed rate increases over the next four years provide the planned revenue needed and also adjust rates to charge each customer class fairly according to the requirements of Proposition

12 EXISTING WATER RATES FOR CITY OF LEMOORE ATTACHMENT A-1 Dwelling Units/Use Minimum Meter Charge per Unit Water Included In Min Meter Charge per Unit/Use in cubic feet Single Family $ Up to 2800 Tiered Excess Water Use Charges per 100 cubic feet $0.90 $0.95 $1.00 Up to 5600 Above 5600 Duplexes/Triplexes $ Up to 2000 Up to 4000 Above 4000 Apartments - 4 or more served by 1 meter $ Up to 1200 Up to 2400 Above 2400 Mobile Home Parks $ Up to 1200 Up to 2400 Above 2400 Two or more dwellings served by 1 meter $ Up to 2800 Up to 5600 Above 5600 Two or more Uses served by 1 meter $ Up to 2800 Up to 5600 Above 5600 Commercial Establishments $ Up to 2800 Up to 5600 Above 5600 Industrial Uses $ Up to 2800 Up to 5600 Above 5600 Large Volume Industrial Users $ Up to 5,000,000 Above 5,000,000 Schools on metered service $ Up to 2800 Up to 5600 Above 5600 All others $ Up to 2800 Up to 5600 Above

13 EXISTING WATER RATES FOR CITY OF LEMOORE ATTACHMENT A-2 2. Flat Rate Charges Use Monthly Rate Single Family $31.95 Multi-Family $17.85 per unit Large Grocery Stores $32.70 Small Grocery Stores $26.70 Other Commercial Establishments $20.55 Lemoore Elementary School $ Lemoore High School $

14 PROPOSED WATER RATES FOR CITY OF LEMOORE ATTACHMENT B Average Increase all classes 30% 30% 30% Volumetric Rate For All Water 2 ($/HCF) City of Lemoore Water Rates and Charges Present Rates Jan 1, Jan 1, 2018 Jan 1, 2019 Jan 1, 2020 Residential Single Family $0.90 $0.87 $1.10 $1.40 $1.77 Multi Family $0.90 $0.95 $1.19 $1.50 $1.92 Government & Schools $0.96 $1.28 $1.72 $2.28 $2.97 Commercial $0.96 $1.28 $1.63 $2.08 $2.68 Industrial - Regular $0.91 $1.20 $1.58 $2.08 $2.75 Industrial - Seasonal Peak $0.90 $1.47 $2.02 $2.72 $3.61 Fixed Monthly Charges Based on Meter Size 3 ($/Mo) All Residential Single Family $13.20 $13.00 $17.00 $22.00 $29.00 All other up to 1.5" $13.20 $23.00 $30.00 $39.00 $ " up to 2.5" $13.20 $74.00 $96.00 $ $ " $13.20 $ $ $ $ " $13.20 $ $ $ $ " $13.20 $ $ $ $1, " $13.20 $ $ $1, $1, " $13.20 $1, $1, $1, $2, " $13.20 $1, $2, $3, $4, Duplex, Triplex, Apts, Mobile HP 4 Flat Rates for Non-Metered Customers ($/Mo) Multi Family, Per Unit $17.85 $24.00 $31.00 $40.00 $52.00 Business and Retail $20.55 $28.00 $36.00 $47.00 $61.00 Notes: 1. January 1, 2017 rate increases vary by rate class; however, the system average revenue increase is 35% above calendar year 2015 revenues. 2. Present volumetric rates are tiered, $0.90, $0.95, and $1.00. Rate shown is the average. 3. Present fixed monthly charges include 300 to 700 cubic feet of water depending on customer type. New fixed charges do not include any volume of water. 4. Present fixed monthly charges for duplex, triplex, apartments, and mobile home parks vary from $6.55 per unit to $9.45 per unit. New fixed charges are based on meter size only. 14

15 City of Lemoore Water System Community Investment Projects ATTACHMENT C Project FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20 Total Number Project Description Budget Budget Budget Budget Budget 5-Year CIP 9200 Water Line Reimbursement $10,000 $10,000 $10,000 $10,000 $10,000 $50, Water Emergency Trailer 63, , TTHM Project - 18,400, ,400, New Southeast Well - 650,000 2,875, ,525, Replace Well 8-80,000 2,150, ,230, New Water Line N Field 4, ,000 5,450, ,951, Remodel 40 G St. Building - 60, , Fix Drainage 40 G St. 25, , Water Master Plan 500, , SCADA Upgrade - 150, , New Northeast Well 6, ,000 3,375,000-4,056, Repaint Water Tanks ,000 60,000 60, , Install Cameras at Wells , , Rehab Well 10 (4) - 170, , Rehab Well 4 (10) - 170, , Replace Service Lines (1) , , Replace Service Lines (2) , , Replace 6" Water Line (1) , , Replace 6" Water Line (2) , , Replace 6" Water Line (3) , , Replace 8" Water Line (4) , , Replace 6" Water Line (5) , , Add Water Tank Well 7-1,100, ,100, Rehab Well ,000 90, Install Chlorine Equipment 20,000 75, , Cedar Lane Water Line , ,000 TOTALS $628,000 $21,362,000 $11,445,000 $4,812,000 $554,000 $38,801,000 Note: As of March

16 City of Lemoore, California Water Bonds Series 2017 PROSPECTIVE Net Debt Service Schedule as of April 21, 2016 Provided Del Rio Advisors, LLC, Modesto, CA Reserve Fund 1,991, Earnings Rate 2.00 ATTACHMENT D Less: Less: Net Net Periodic Capitalized Reserve Fund Periodic Annual Date Debt Service Interest Earnings Debt Service Debt Service 2/1/2017 8/1/ , (264,924.00) (19,910.00) 451, /1/ , (264,924.00) (19,910.00) 451, , /1/ , (19,910.00) 715, /1/2019 1,090, (19,910.00) 1,070, ,786, /1/ , (19,910.00) 710, /1/2020 1,255, (19,910.00) 1,235, ,946, /1/ , (19,910.00) 702, /1/2021 1,267, (19,910.00) 1,247, ,950, /1/ , (19,910.00) 691, /1/2022 1,276, (19,910.00) 1,256, ,948, /1/ , (19,910.00) 680, /1/2023 1,285, (19,910.00) 1,265, ,946, /1/ , (19,910.00) 665, /1/2024 1,300, (19,910.00) 1,280, ,946, /1/ , (19,910.00) 650, /1/2025 1,315, (19,910.00) 1,295, ,946, /1/ , (19,910.00) 634, /1/2026 1,334, (19,910.00) 1,314, ,948, /1/ , (19,910.00) 617, /1/2027 1,352, (19,910.00) 1,332, ,949, /1/ , (19,910.00) 599, /1/2028 1,369, (19,910.00) 1,349, ,949, /1/ , (19,910.00) 580, /1/2029 1,385, (19,910.00) 1,365, ,946, /1/ , (19,910.00) 561, /1/2030 1,406, (19,910.00) 1,386, ,947, /1/ , (19,910.00) 540, /1/2031 1,430, (19,910.00) 1,410, ,951, /1/ , (19,910.00) 518, /1/2032 1,448, (19,910.00) 1,428, ,947, /1/ , (19,910.00) 496, /1/2033 1,471, (19,910.00) 1,451, ,947, /1/ , (19,910.00) 472, /1/2034 1,497, (19,910.00) 1,477, ,949, /1/ , (19,910.00) 447, /1/2035 1,522, (19,910.00) 1,502, ,949, /1/ , (19,910.00) 420, /1/2036 1,545, (19,910.00) 1,525, ,946, /1/ , (19,910.00) 393, /1/2037 1,573, (19,910.00) 1,553, ,946, /1/ , (19,910.00) 364, /1/2038 1,604, (19,910.00) 1,584, ,948, /1/ , (19,910.00) 333, /1/2039 1,633, (19,910.00) 1,613, ,947, /1/ , (19,910.00) 301, /1/2040 1,666, (19,910.00) 1,646, ,948, /1/ , (19,910.00) 267, /1/2041 1,702, (19,910.00) 1,682, ,950, /1/ , (19,910.00) 232, /1/2042 1,737, (19,910.00) 1,717, ,950, /1/ , (19,910.00) 195, /1/2043 1,775, (19,910.00) 1,755, ,950, /1/ , (19,910.00) 156, /1/2044 1,811, (19,910.00) 1,791, ,947, /1/ , (19,910.00) 115, /1/2045 1,855, (19,910.00) 1,835, ,951, /1/ , (19,910.00) 72, /1/2046 1,897, (19,910.00) 1,877, ,950, /1/ , (19,910.00) 27, /1/2047 1,942, (2,010,910.00) (68,535.00) (41,070.00) Totals 58,972, (529,848.00) (3,185,600.00) 55,257, ,257,

17 ATTACHMENT E LEMOORE WATER ENTERPRISE FUND HISTORICAL PROJECTED FY2013 FY 2014 FY 2015 FY 2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 Operating s: 35% 30% 30% 30% Rate-Based s $3,952,379 $4,100,305 $3,513,798 $3,370,000 $4,550,000 $5,915,000 $7,690,000 $9,997,000 $9,997,000 $9,997,000 $9,997,000 $9,997,000 $9,997,000 $9,997,000 Fees $149,818 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 Penalties 75,197 75,568 71,666 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 Installation Charges 6,962 6,349 18,614 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Total Operating s $4,034,538 $4,182,222 $3,753,896 $3,605,000 $4,785,000 $6,150,000 $7,925,000 $10,232,000 $10,232,000 $10,232,000 $10,232,000 $10,232,000 $10,232,000 $10,232,000 Non-Operating s Solar Debt Service from Sewer/General 143, , , , , , , , , ,408 Interest Income 5,300 11,887 26,965 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 Total s $4,039,838 $4,194,109 $3,780,861 $3,617,000 $4,940,408 $6,305,408 $8,080,408 $10,387,408 $10,387,408 $10,387,408 $10,387,408 $10,387,408 $10,387,408 $10,387,408 Operation & Maintenance Expenses: Escalate Electricity - Pumping $998,000 $958,824 $720,754 $550,000 $569,000 $589,000 $610,000 $631,000 $653,000 $676,000 $700,000 $725,000 $750,000 $776, % Personnel 650, , , , , , , , , ,000 1,013,000 1,033,000 1,054,000 1,075, % Contract Services 279, , , , , , , , , , , , , , % Chemicals 361, , , , , , , , , , , , , , % Parts and Supplies 127, , , , , , , , , , , , , , % Repair, Maint, and Other 162, , , , , , , , , , , , , , % New O&M for Pretreatment and Filtering 500,000 1,000,000 2,500,000 2,550,000 2,601,000 2,653,000 2,706,000 2,760,000 2,815, % Customer Services and Billing 269, , , , , , , , , , , , , , % Gen Government Overhead 742, , , , , , , , , , , , , , % Total Adjusted Expenses $3,590,463 $3,296,808 $3,219,707 $3,342,000 $3,557,000 $4,121,000 $4,686,000 $6,252,000 $6,370,000 $6,491,000 $6,615,000 $6,742,000 $6,871,000 $7,004,000 Net From Water Operations $449,375 $897,301 $561,154 $275,000 $1,383,408 $2,184,408 $3,394,408 $4,135,408 $4,017,408 $3,896,408 $3,772,408 $3,645,408 $3,516,408 $3,383,408 Annual Debt Service Solar (100%) $163,339 $573,630 $573,630 $573,630 $573,630 $573,630 $573,630 $573,630 $573,630 $573,630 $573,630 $573,630 $573,630 Annual Debt Service ($30 M) 941,952 1,826,800 1,986,150 1,990,400 1,988,600 1,986,000 1,986,750 1,986,000 1,988,750 Total Debt Service $163,339 $573,630 $573,630 $573,630 $1,515,582 $2,400,430 $2,559,780 $2,564,030 $2,562,230 $2,559,630 $2,560,380 $2,559,630 $2,562,380 Debt Service Coverage Ratio Net s after Debt Service ($12,476) ($298,630) $809,778 $668,826 $993,978 $1,575,628 $1,453,378 $1,334,178 $1,212,778 $1,085,028 $956,778 $821,028 Pay-as-go available for Capital Projects (750,000) (750,000) (750,000) (750,000) (750,000) (750,000) (750,000) (750,000) (750,000) (750,000) Fund Balance 5,600,000 $5,587,524 $5,288,894 $5,348,672 $5,267,497 $5,511,475 $6,337,102 $7,040,480 $7,624,657 $8,087,435 $8,422,462 $8,629,240 $8,700,267 Notes Depreciation is not included for the purpose of setting rates

18 Cost Component ($/yr) Total Single-Family Multi-Family Gov/Schools Commercial 18 ATTACHMENT F-1 (a) Industrial - Regular Industrial - Seasonal Volumetric $2,585,450 $922,156 $256,401 $146,080 $179,373 $885,622 $195,819 Capacity $775, ,689 59,764 83,146 39, , ,299 Distribution $343, ,410 34,035 19,391 23, ,560 25,994 Fire Protection $46,290 16,510 4,591 2,615 3,212 15,856 3,506 Customer Services & Billing $270, ,656 34,219 9,063 17,813 6,250 5,000 Administrative Overhead $530, ,876 73,926 42,118 51,717 76,603 19,760 Total Requirement 4,550,000 1,882, , , ,911 1,229, ,378 s at Present Rates 1 3,369,000 1,471, , , , , ,000 Balance/(Deficency) of Funds (1,181,000) (411,296) (60,936) (139,412) (84,911) (324,066) (160,378) Summary Statistics Water Enterprise Requirement Allocation Table FOR JANUARY 1, 2017 Treated Water Sales (HCF) 1 2,887,000 1,030, , , , , ,000 Cost of Service ($/HCF) Present Average Rate ($/HCF) Change (%) 35% 28% 15% 86% 37% 36% 81% Cost of Service Detail by Customer Sector in $/HCF Total Single-Family Multi-Family Gov/Schools Commercial Industrial - Industrial - Regular Seasonal Volumetric $0.90 $0.90 $0.90 $0.90 $0.90 $0.90 $0.89 Capacity Distribution Fire Protection Billing & Customer Services Administrative Overhead Total $1.58 $1.83 $1.62 $1.86 $1.58 $1.24 $1.63 Notes: 1. HCF is Hundred Cubic Feet. Baseline revenue and volumes are from Calendar Rates are set from these baseline references.

19 Cost Component ($/yr) Total Single-Family Multi-Family Gov/Schools Commercial ATTACHMENT F-1 (b) Industrial - Regular Industrial - Seasonal Volumetric $3,344,989 $1,193,061 $331,725 $188,994 $232,068 $1,145,795 $253,345 Capacity $1,236, ,556 95, ,628 63, , ,155 Distribution $486, ,513 48,244 27,486 33, ,638 36,845 Fire Protection $47,220 16,842 4,683 2,668 3,276 16,175 3,576 Customer Services & Billing $270, ,656 34,219 9,063 17,813 6,250 5,000 Administrative Overhead $530, ,876 73,926 42,118 51,717 76,603 19,760 Total Requirement 5,915,000 2,417, , , ,408 1,614, ,682 at 2017 Rates 4,550,000 1,882, , , ,911 1,229, ,378 Balance/(Deficency) of Funds (1,365,000) (535,208) (125,192) (100,544) (86,497) (385,254) (132,305) Summary Statistics Water Enterprise Requirement Allocation Table FOR JANUARY 1, 2018 Treated Water Sales (HCF) 1 2,887,000 1,030, , , , , ,000 Cost of Service ($/HCF) Present Average Rate ($/HCF) Change (%) 30% 28% 27% 33% 27% 31% 37% Cost of Service Detail by Customer Sector in $/HCF Total Single-Family Multi-Family Gov/Schools Commercial Industrial - Industrial - Regular Seasonal Volumetric $1.16 $1.16 $1.16 $1.16 $1.16 $1.16 $1.16 Capacity Distribution Fire Protection Billing & Customer Services Administrative Overhead Total $2.05 $2.35 $2.06 $2.47 $2.01 $1.63 $2.24 Notes: 1. HCF is Hundred Cubic Feet. Rates are set from 2015 baseline volume. 19

20 Cost Component ($/yr) Total Single-Family Multi-Family Gov/Schools Commercial 20 ATTACHMENT F-1 (c) Industrial - Regular Industrial - Seasonal Volumetric $4,461,514 $1,591,293 $442,452 $252,078 $309,531 $1,528,250 $337,909 Capacity $1,765, , , ,398 91, , ,417 Distribution $614, ,113 60,923 34,710 42, ,432 46,528 Fire Protection $48,150 17,174 4,775 2,721 3,341 16,493 3,647 Customer Services & Billing $270, ,362 34,358 9,099 17,885 6,275 5,020 Administrative Overhead $530, ,876 73,926 42,118 51,717 76,603 19,760 Total Requirement 7,689,500 3,105, , , ,179 2,127, ,282 at 2018 Rates 5,915,000 2,417, , , ,481 1,614, ,703 Balance/(Deficency) of Funds (1,774,500) (688,387) (164,304) (127,131) (113,699) (513,400) (167,580) Summary Statistics Water Enterprise Requirement Allocation Table FOR JANUARY 1, 2019 Treated Water Sales (HCF) 1 2,887,000 1,030, , , , , ,000 Cost of Service ($/HCF) Present Average Rate ($/HCF) Change (%) 30% 28% 28% 32% 28% 32% 34% Cost of Service Detail by Customer Sector in $/HCF Total Single-Family Multi-Family Gov/Schools Commercial Industrial - Industrial - Regular Seasonal Volumetric $1.55 $1.54 $1.55 $1.55 $1.55 $1.55 $1.54 Capacity Distribution Fire Protection Billing & Customer Services Administrative Overhead Total $2.66 $3.02 $2.63 $3.25 $2.58 $2.15 $3.00 Notes: 1. HCF is Hundred Cubic Feet. Rates are set from 2015 baseline volumes.

21 Cost Component ($/yr) Total Single-Family Multi-Family Gov/Schools Commercial 21 ATTACHMENT F-1 (d) Industrial - Regular Industrial - Seasonal Volumetric $6,078,550 $2,168,044 $602,815 $343,442 $421,717 $2,082,151 $460,381 Capacity $2,373,228 1,095, , , , , ,550 Distribution $695, ,052 68,970 39,294 48, ,224 52,673 Fire Protection $49,110 17,516 4,870 2,775 3,407 16,822 3,720 Customer Services & Billing $270, ,362 34,358 9,099 17,885 6,275 5,020 Administrative Overhead $530, ,876 73,926 42,118 51,717 76,603 19,760 Total Requirement 9,996,350 3,992, , , ,415 2,809, ,105 at 2019 Rates 7,690,000 3,105, , , ,179 2,127, ,282 Balance/(Deficency) of Funds (2,306,350) (886,492) (215,365) (161,196) (149,235) (681,739) (212,823) Summary Statistics Water Enterprise Requirement Allocation Table FOR JANUARY 1, 2020 Treated Water Sales (HCF) 1 2,887,000 1,030, , , , , ,000 Cost of Service ($/HCF) Present Average Rate ($/HCF) Change (%) 30% 29% 29% 30% 29% 32% 32% Cost of Service Detail by Customer Sector in $/HCF Total Single-Family Multi-Family Gov/Schools Commercial Industrial - Industrial - Regular Seasonal Volumetric $2.11 $2.10 $2.11 $2.11 $2.11 $2.11 $2.10 Capacity Distribution Fire Protection Billing & Customer Services Administrative Overhead Total $3.46 $3.88 $3.38 $4.24 $3.33 $2.84 $3.97 Notes: 1. HCF is Hundred Cubic Feet. Rates are set from 2015 baseline volumes.

22 ATTACHMENT F-2 (a) Account Description Functionalization and Classification of Requirement Year 2017 Total Total (Calculated) Volumetric Capacity Distribution Fire Protection Finance & Billing Admin Overhead Allocations Electricity - Pumping 569, , , % Variable Personnel - PW 900, , , , ,000 27, /22/15/3/0 split Contract Services 237, , , % Capacity Chemicals 408, , , % Variable Parts and Supplies 306, , ,400 67, ,100 9, /25/30/3/0 split Repair and Maint 337, , ,650 74, ,100 10, /20/30/3/0 split Customer Service & Billing 270, , , :1 Administrative Overhead 530, , ,000 1:1 Debt Service Existing 430, , ,178 86, /20 Capital Outlay Saving 562, , , , /20 Debt Service New Debt Service Coverage New Totals 4,550,000 4,550,000 2,585, , ,200 46, , ,000 22

23 ATTACHMENT F-2 (b) Account Description Functionalization and Classification of Requirement Year 2018 Total Total (Calculated) Volumetric Capacity Distribution Fire Protection Finance & Billing Admin Overhead Allocations Electricity - Pumping 589, , , % Variable Personnel - PW 918, , , , ,700 27, /22/15/3/0 split Contract Services 242, , , % Capacity Chemicals 416, , , % Variable Parts and Supplies 312, , ,800 68, ,200 9, /25/30/3/0 split Repair and Maint 344, , ,800 75, ,200 10, /20/30/3/0 split O&M Pretreatment/Filtering 500, , , , /27 Customer Service & Billing 270, , , :1 Administrative Overhead 530, , ,000 1:1 Debt Service Existing 430, , , , /40 Debt Service New 941, , , ,488 94, /25/10 Debt Service Coverage New 421, , , ,457 42, /25/10 Totals 5,915,000 5,915,000 3,344,989 1,236, ,478 47, , ,000 23

24 ATTACHMENT F-2 (c) Account Description Functionalization and Classification of Requirement Year 2019 Total Total (Calculated) Volumetric Capacity Distribution Fire Protection Finance & Billing Admin Overhead Allocations Electricity - Pumping 610, , , % Variable Personnel - PW 936, , , , ,400 28, /22/15/3/0 split Contract Services 247, , , % Capacity Chemicals 424, , , % Variable Parts and Supplies 318, , ,200 69, ,300 9, /25/30/3/0 split Repair and Maint 351, , ,950 77, ,300 10, /20/30/3/0 split O&M Pretreatment/Filtering 1,000,000 1,000, , , /35 Customer Service & Billing 270, , , :1 Administrative Overhead 530, , ,000 1:1 Debt Service Existing 430, , , , /40 Debt Service New 1,826,800 1,826,800 1,187, , , /25/10 Debt Service Coverage New 746, , , ,620 74, /25/10 Totals 7,689,500 7,689,500 4,461,514 1,765, ,328 48, , ,000 24

25 ATTACHMENT F-2 (d) Account Description Functionalization and Classification of Requirement Year 2020 Total Total (Calculated) Volumetric Capacity Distribution Fire Protection Finance & Billing Admin Overhead Allocations Electricity - Pumping 631, , , % Variable Personnel - PW 955, , , , ,250 28, /22/15/3/0 split Contract Services 252, , , % Capacity Chemicals 432, , , % Variable Parts and Supplies 324, , ,600 71, ,400 9, /25/30/3/0 split Repair and Maint 358, , ,100 78, ,400 10, /20/30/3/0 split O&M Pretreatment/Filtering 2,500,000 2,500,000 1,675, , /33 Customer Service & Billing 270, , , :1 Administrative Overhead 530, , ,000 1:1 Debt Service Existing 430, , , , /25 Debt Service New 1,986,150 1,986,150 1,290, , , /25/10 Debt Service Coverage New 1,327,978 1,327, , , , /25/10 Totals 9,996,350 9,996,350 6,078,550 2,373, ,463 49, , ,000 25

26 ATTACHMENT F-3 Single-Family Multi-Family Volumetric and Capacity Allocation Factors Schools/City Commercial Industrial - Industrial - Regular Seasonal Peak Industrial - Seasonal Peak Totals without Well #9 Month Cubic Feet Cubic Feet Cubic Feet Cubic Feet Cubic Feet Cubic Feet Total Less Well 9 Cubic Feet 1 5,209,800 1,584, ,100 1,217,900 7,352, , ,900 15,867, ,096,000 1,764, ,300 1,126,600 8,060, , ,300 16,711, ,308,700 1,734, ,600 1,259,100 7,563, , ,200 16,861, ,835,200 2,156,300 1,176,500 1,487,600 8,781, , ,600 21,663, ,369,306 2,476,300 1,661,700 1,923,700 8,743, , ,200 24,641, ,694,900 2,658,900 1,852,000 1,991,600 8,391, , ,000 24,981, ,571,000 3,052,600 2,286,800 2,115,200 9,659,800 1,432,500 1,432,500 31,117, ,971,700 2,969,100 2,260,900 1,923,400 8,528,000 5,489,400-3,430,000 2,059,400 29,712, ,665,500 3,078,300 2,416,000 2,112,400 9,168,400 6,119,300-3,736,000 2,383,300 30,823, ,053,000 2,608,100 1,778,100 2,060,500 7,630,700 5,183,600-3,845,000 1,338,600 25,469, ,970,000 2,371,200 1,140,200 1,415,000 7,533,800 1,252, , ,300 21,177, ,229,400 2,177, ,100 1,397,100 7,483, , ,200 18,166,700 Totals 102,974,506 28,631,600 16,312,300 20,030,100 98,894,900 21,866, ,709,906 10,350, ,193,906 % Allocation VOLUME 36% 10% 6% 7% 34% 8% 100% Non Coincident Peak Total 31,744,800 Averages CF 8,581,209 2,385,967 1,359,358 1,669,175 8,241, ,542 23,099,492 73% Peak Factor Peak - Average 3,989, , , ,025 1,418,558 1,196,858 8,645,308 27% % Allocation CAPACITY 46% 8% 11% 5% 16% 14% 100% 100.0% 26

27 WEIGHTING FACTORS FOR COST OF SERVICE MODELS (ALL YEARS) ATTACHMENT F-4 Billing & Cust Svcs Administrative Overhead Customer Count Weighting Factor Result Allocation Volumetric Allocation Weighting Factor Result Allocation Single-Family 6, , % 36% % Multi-Family , % 10% % Schools / City % 6% % Commercial % 7% % Ind - Regular % 34% % Ind - Seasonal % 8% % Totals 6,690 8, % 100% % Fire Protection Weighting Distribution System Weighting Volumetric Allocation % Weighting Factor Result Allocation Volumetric Allocation % Weighting Factor Result Allocation Single-Family 36% % 36% % Multi-Family 10% % 10% % Schools / City 6% % 6% % Commercial 7% % 7% % Ind - Regular 34% % 34% % Ind - Seasonal 8% % 8% % Totals 100% % 100% % 27

28 ATTACHMENT F-5 (a) Meter Size Calculation of Fixed Monthly Service Fee and Year 2017 Number of Accounts Meter Size Multiplier* Rate ($/Mo) ($/Yr) All Single Family 6, $13.00 $82,225 $986,700 Up to 1 1/2" $ ,175 62,100 2" and 2.5" $ , ,100 3" $ ,900 4" $ ,440 77,300 6" $ ,300 27,600 8" $ ,888 70,700 10" $1, ,174 38,100 12" $1, ,978 23,700 Totals 6,725 $117,184 $1,406,200 Customer Class Calculated Volumetric Rate to Meet Overall Requirement Year 2017 Requirement Less Fixed Balance at Volumetric Volume HCF Calculated Rate / HCF Fixed Percent of Total Single-Family $1,882,002 $986,700 $895,302 1,030,000 $ % Multi-Family 463, , , ,000 $ % Schools / Govt 302,449 94, , ,000 $ % Commmercial 315,984 59, , ,000 $ % Industrial - Regular 1,229,091 39,000 1,190, ,000 $1.20 3% Industrial - Seasonal 357,398 35, , ,000 $ % Totals / Averages $4,550,000 $1,406,300 $3,143,700 2,887,000 $4,550,000 $1.58 per HCF overall average 28

29 ATTACHMENT F-5 (b) Meter Size Customer Class Calculation of Fixed Monthly Service Fee and Year 2018 Number of Accounts Meter Size Multiplier* Rate ($/Mo) ($/Yr) All Single Family 6, $16.90 $106,893 $1,282,700 Up to 1 1/2" $ ,728 80,700 2" and 2.5" $ , ,400 3" $ ,076 12,900 4" $ , ,500 6" $ ,990 35,900 8" $ ,654 91,900 10" $1, ,126 49,500 12" $2, ,571 30,900 Totals 6,725 $152,275 $1,827,400 Calculated Volumetric Rate to Meet Overall Requirement Year 2018 Requirement Less Fixed Balance at Volumetric Volume HCF Calculated Rate / HCF Fixed Percent of Total Single-Family $2,417,210 $1,282,700 $1,134,510 1,030,000 $ % Multi-Family 588, , , ,000 $ % Schools / Govt 402, , , ,000 $ % Commmercial 402,481 76, , ,000 $ % Industrial - Regular 1,614,346 50,700 1,563, ,000 $1.58 3% Industrial - Seasonal 489,703 46, , ,000 $ % Totals / Averages $5,915,000 $1,827,300 $4,087,700 2,887,000 $1.42 $5,915,000 $2.05 per HCF overall average 29